This article has been written by Ishaan Banerjee from Vivekananda Institute of Professional Studies, affiliated to Guru Gobind Singh Indraprastha University. This article explores the basics of the Transfer of Property Act 1882, along with the concept of alienation. We will also examine the conditions and exceptions relating to the restriction of alienation under this Act.  

Introduction

The Transfer of Property Act, 1882 is an Act laying down the rules and regulations regarding the transfer of property among persons in India. It explains how a transfer of property is completed and the conditions under which transfer may be carried out. An understanding of the basic terms of this Act along with exploring alienation and its history would be important in understanding the conditions and exceptions involved in the restraint of alienation.

What is the transfer of property according to law?

Section 5 of the Transfer of Property Act, 1882 has several conditions for an act to be defined as a ‘transfer of property’-

• A ‘living person’ must convey property. Conveying essentially means giving a title of ownership on the property to the transferee. A living person has been defined in the same section to include company, association or a body of individuals whether it has been incorporated or not. 
• The conveyance of the property can be carried out in both the present and the future.
• This conveyance may happen towards one or more other living persons, including himself.

What can be transferred?

It is not explicitly stated in the Act regarding what is ‘property’ or what can be transferred. Rather, the Act states that property of any kind may be transferred subject to exceptions given under Section 6. The property that can be transferred includes both movable and immovable property, as well as intangible property like tenancy, copyrights etc.

Who is competent to transfer?

Section 7 of the Transfer of Property Act categorizes persons competent to transfer as-

• Every person is competent to contract under the Indian Contract Act, 1872 and entitled to the transferable property.
•  A person who is authorised to dispose of transferable property that he does not have the ownership to.

This property can be transferred wholly or partly, absolutely or conditionally, with regard to the extent of the law and circumstances. The property, as stated above may be conveyed to any living person including a company, association or a body of individuals whether incorporated or not. Under Section 13, even an unborn child can be the transferee of the property. 

What is alienation?

Alienation means transferring of property. This transfer of property can be through gifts, sales and mortgages. Under Hindu Law, no person of the Joint Hindu family, not even the Karta, has the full power to alienate the joint family property or his own interest in the joint family property without the consent of all coparceners. In the case of separate property, a Hindu can alienate that property whether it comes under Dayabhaga or Mitakshara school. This power is absolute. 

Earlier, under the classical law, the father or the Karta had the power to alienate the whole joint family property without the consent of the other coparceners, and that is why there have been certain conditions added for the situation where a Karta or father can do so.

Can alienation of property be restrained?

Section 10 to 18 of the Transfer of Property Act, 1882 state the rules for alienation of property-

• Section 10 lays down that where the transferee is absolutely restrained from transferring his interest in his property to another person because of a condition which came along when the property was transferred to the transferee, then this condition will be made void. The transfer, from the transferor to the transferee would remain valid.  
• For example, A transfers some property to B as a gift but with the condition that while A is alive, B must not transfer the property to any other person. This condition will be held void as it absolutely restrains B from transferring his interest in the property to another person.

This is commonly known as the ‘rule against alienability’. The Transfer of Property Act is based on the principle that there can be a free transfer of property and has been specifically made with regard to free transfer. If conditions restraining transfer are imposed, then the free transfer would be restricted and there would be no use for the Transfer of Property Act.

However, only conditions mandating ‘absolute restriction’ are void. There are conditions which call for partial restraint to be observed with regard to the transfer of property. If we are to determine whether a condition is absolute or partial, then one must look at the substance of the condition, and not merely the words. Therefore, restraints can be classified into two categories.

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Types of restraints

Absolute Restraints

• An absolute restraint is such a restraint which completely takes away the right of the transferee to alienate or dispose of the property. The transferee can now no longer transfer his interest in the property to another person and he has no freedom to do what he wants with the property in his capacity as the owner of the property. 
• Section 10 stipulates that any condition imposed on the transferee which would amount to an absolute restraint on the right of the transferee to dispose of his interest in the property shall be void. The property must be transferred to the transferee subject to the condition.
• In Rosher v. Rosher (1884) 26 Ch D 801, A made a gift of a house to B, and gave a condition that if B decides to sell the house during the lifetime of A’s wife, she should have the option of purchasing it for Rs 10000, while the market value of the house was set at Rs 10,00,000. This condition was held to be an absolute restraint and was declared void. 
• In Kannamal v. Rajeshwari, AIR 2004 NOC 8 (Mad), a life estate was to be created in favour of ‘M’, but the transferor gave an absolute restriction along with the property transfer to M, whilst divesting himself of all his interests in the property. This restraint was held to be void as there was an absolute transfer. 
• In Mohd Raza v. Abbas BandiBibi,(1932) 59 IA 236, a condition imposing restriction for a particular time or transfer to a specific person has been held to be void. 

Partial Restraints

• A partial restraint is a condition which partially takes away the right of the transferee to dispose of his interest in the property. Here, the right is not taken away substantially. Section 10 does not explicitly talk about partial restraints. A condition imposing partial restriction is valid. 
• In Mata Prasad v. Nageshwar Sahai (1927) 47 All 484, there was a dispute regarding succession between nephew and widow. A compromise was formed that the widow had possession of the property while the title for the same was given to the nephew with the condition that he was restricted from alienating the property during the widow’s lifetime. It was held that the compromise and the condition were valid and prudent in the present case.

Exceptions to the restraints

Lease

A lease is a transfer of property wherein the lessee only has the right of enjoyment of the property, while the ownership right is still with the lessor. Conditions imposing restrictions are valid in the case of a lease, where the condition is for the benefit of the lessor or those claiming under him. In Raja JagatRanvir v. Bagriden, AIR 1973 All 1, a condition in the lease that the lessee shall not sublet or assign was held to be valid. 

Married Woman

When the property is to be transferred to a married woman, who is not a Hindu, Mohammedan or Buddhist, then the condition restricting alienation can be valid.

Repugnant conditions

• Section 11 of the Transfer of Property Act contains conditions which are inconsistent with the nature of the interest transferred are repugnant conditions. These conditions come with the transfer when the transfer confers to the transferee, absolute interests in the property. Any condition with a transfer of absolute interests in the property will be void.
• When a property is transferred absolutely, it must be transferred along with all its legal incidents. In Manjusha Devi v. Sunil Chandra, AIR 1972 Cal 310, the parties entered into a sale for a piece of land. In the sale deed, it was mentioned that the buyer could only use the land for setting up a factory for jute textile manufacturing. It was held that this condition was invalid as the absolute interests in the land had been transferred to the buyer and he could use it as he pleased.

An exception to Section 11

If the transferor has another piece of immovable property, he may, for the benefit of that property, impose conditions of restrictions on the transferee’s right of enjoyment. For example, A has two properties: X and Y. A sells them to B with the condition that a portion of X, adjoined to Y, shall be kept open for the benefit of Y. This condition will be valid.  

Positive and negative conditions

• Positive conditions: These are those conditions imposed on the transfer where the transferor imposes a condition on the transferee to do some act. For example, A transfers land to B, on the condition that he shall maintain and keep filling up the well on that plot of land. This condition is positive.
• Negative conditions: These are those conditions imposed on the transfer when the transferor imposes a condition on the transferee to not do some act. For example, A transfers land to B, on the condition that he shall leave open a four feet wide space on the land, and would not build anything on it.

Difference between Section 10 and Section 11

• Section 10 specifies that in a transfer with condition that absolutely restrains the alienation of the property by the transferee, the condition will be deemed to be void.
• Section 11 specifies that in a transfer where absolute rights in the property have also been alienated to the transferee, and where a condition is imposed that the transferee cannot, in spite of having the absolute right in the property, do an act for his enjoyment of the property, such condition will be deemed to be void.
• Thus, the differences in these sections are that in Section 10 the condition is deemed void due to absolute restrainment and in Section 11, the condition is deemed void due to the transfer being of absolute nature.   

Condition of insolvency

• Section 12 provides that when the transferee becomes insolvent, and if he has some interest in the property that was transferred to him by the transferor, the transferee still would not lose his interest in the property. Hence, any condition stating that transferee shall lose the interest in the transferred property on insolvency and this interest shall be reverted back to the transferor shall be void. 
• However, this section does not apply to a condition on a lease for the benefit of the lessor or those claiming benefit under him. However, in Smith v. Gronow (1891) 2 QB 394, if lessee assigns the lease and then is rendered insolvent, then this condition will not apply.

Conclusion

The Transfer of Property Act, 1882 has been made for the regulation of the free transfer of property in India. This transfer can be in the present or the future and must be between living persons. This article also explores what can be transferred under this Act, and who are the ones competent to transfer. The concept of alienation was also explored. Earlier, under the classical law, the father or the Karta had the right to alienate the joint family property without the consent of the coparceners, but now conditions have been introduced to regulate this. 

Section 10, 11 and 12 contain certain conditions under which restraining of alienation of the property by the transferee is void. It also has exceptions where these conditions may be valid. Primarily, under Section 10, conditions of restraint can be classified into two categories: absolute and partial. Whether a condition is absolute or partial is determined by the substance of that condition, not merely the words. This article explored other conditions such as positive and negative and insolvency, along with their exceptions.

References

[1] https://www.lawctopus.com/academike/restraints-on-transfer/#_edn40

[2] https://www.legalbites.in/restraints-transfer-section-10/

[3] https://www.lawctopus.com/academike/alienation-of-property/

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